As the IEA’s World Energy Outlook 2013 will be released today, I’d like to take a look back at last week’s panel discussion “Energy future at the crossroads” in Vienna. Ingmar Höbarth, Managing Director of the Austrian Klimafonds, first talked about the global energy and climate framework and its political and economic implications: To keep it short, despite the IPCC’s recently released Fifth Assessment Report and warnings of global food scarcity, the world is heading towards climate disaster.
While energy policy will determine our planet’s future, current power, profits and geopolitical interests, the US shale gas boom (that was promoted in the IEA’s World Energy Outlook 2012) and the necessary investments in our energy infrastructure impede a renewable energy transition. Moreover, many people still haven’t realized that a world with 80-95% lower emissions – which would need energy efficiency, renewable energy and awareness-raising – would involve profound changes in our lives.
Steffen Bukold then talked about the methodological problems with the IEA’s World Energy Outlook which is now regarded as the “bible” of Western energy policy: Actually, the report only delivers scenarios but these are viewed as sound forecasts by the media. Moreover, its price forecasts are always moderate because they only reflect current costs and futures prices but this is seen as an indicator of a constant future development of fossil fuel prices. Finally, the whole report consists of a 20-page summary, a 2-page press release and a 700-page main part but most of the risks that are featured in the main part aren’t included in the shorter documents that are distributed by the media.
If we take a look at the global energy situation in 2008 and 2013, we get a completely different picture: In 2008, it was expected that renewable energy will prevail thanks to cost advantages and ambitious climate policies while oil is facing its peak, gas will only be used as a transition technology to a renewable energy future and the days of coal are over because of climate change. Five years later, structural problems and rising prices of renewable energy, the US shale gas boom, shale oil instead of peak oil and the renaissance of cheap coal have dramatically changed the global energy landscape.
In fact, the situation even looked worse when Steffen Bukold told us that the energy mix hasn’t changed much in the past 25 years and that the increase in fossil fuels in 2012 alone was almost as high as the total installed solar and wind energy. Nevertheless, he also made clear that probably no other country than the US will experience a shale gas boom, that Europe won’t depend on shale gas and that shale oil reserves are pretty small. Moreover, while we are currently facing rather constant and moderate fossil fuel prices, these are expected to significantly increase again in the future.
So, there are some obvious challenges for Europe’s energy policy as Europe is in a particularly difficult situation given its high dependence on energy imports: First of all, given the available fossil fuel reserves, political action will be necessary to put a reasonable price on carbon and to prevent the exploitation of all fossil fuel reserves in order to avoid dramatic climate change.
Moreover, politicians should also address the costs of fossil fuels and encourage people to think about the issue of affluence and behavioural change. Above all, Europe should not try to follow the US and hope for a European shale gas boom given the small European shale gas reserves, the available conventional gas reserves and the environmental dangers and emissions of fracking.
P.S.: An excellent German blogpost can be found on Georg Guensberg’s blog: “Vor dem World Energy Outlook 2013: der Shale Boom wird überschätzt, die Kosten des fossilen Booms ignoriert.” It also features the following interview with IEA’s Chief Economist Fatih Birol who also doesn’t expect a global shale gas boom and reminds us that “the era of cheap oil is over”: